The Fundamentals of Hedge Fund Management, 2nd Edition

CHAPTER 1

The Hedge Fund Industry

The last pure bastion of capitalism rests in two words: hedge fund. There is no other business, enterprise, occupation, or opportunity that exists to the best of my knowledge, that allows one to make so much so fast (legally). Hedge funds are not new. These types of investment vehicles have been around since 1949 when Alfred Winslow Jones launched the first fund known to Wall Street. However, in the more than 60-odd years since Mr. Jones's invention, the industry has grown larger, more diverse, and more powerful than one could have imagined. If you ask recent business school graduates where they want to work, they no longer say IBM, General Electric (GE), Intel, or the like but rather Bridgewater, SAC, Mariner, or Maverick. People rob banks because that's where the money is. Well, people want to work at hedge funds because that's really where the money is.

The growth of the hedge fund industry over the past few years in the wake of the credit crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the great recession has been amazing. Many industry observers believe that since those harrowing days in September of 2008, assets in these often-called secretive investment vehicles have continued to grow because people have realized that markets don't always rise and, as such, want some protection on the downside or better yet, a hedge. The industry continues to grow at a record pace even with the weak performance numbers in recent ...